Tencent Holdings: The performance declines, but the stock price rises?

According to the 2022 Q2 financial report released by Tencent Holdings, the company’s revenue in the second quarter was 134 billion RMB, down 3% year-on-year; net profit was 18.6 billion RMB, down 56% year-on-year. Under non-IFRS, net profit was 28.1 billion RMB, It fell 17% year-on-year, beating profit expectations.

If you simply look at the decline in profits, the intuitive feeling is that Tencent's financial report is bad! The performance of Tencent as a leading manufacturer is like this, which can only show that this year is really too difficult. It is true in all walks of life, and a lot of confidence has also been destroyed.

But if you go back to Tencent's business itself, you can find that Tencent's fundamentals are still very stable. Frankly speaking, the traffic dividend of the mobile Internet has reached its peak. It is quite good that the business development of the C-end can maintain a certain stability. It is very difficult for Tencent, which has a large plate, to maintain growth. The game business has always been a profitable business for Tencent. Strict game supervision will inevitably have a certain impact on Tencent. Even if the game version number is resumed, Tencent has not been seen in several batches. The overseas gaming business is also developing not so smooth.

Therefore, it makes sense that Tencent wants to maintain high growth in the future and turn to the B-side. The opportunity for B-side Tencent lies in the service capabilities of financial technology and cloud services. The focus here is on the cloud business. The cloud market is recognized as having a large incremental market, but the cloud business requires long-term investment. At present, many companies that provide cloud services are still in a state of loss, and the competition pressure in the cloud market is also very high. In the international market, Amazon's AWS, Microsoft Cloud, Google Cloud, domestic Alibaba Cloud, Huawei Cloud, Baidu Smart Cloud, etc. In addition to the market rate, Tencent Cloud will need to consider how to make profits in the future.

In this financial report, the video account was highlighted. The user participation of the video account has been very optimistic, and the total user usage time exceeds 80% of the total user usage time in the moments. The total video playback volume of the video account increased by more than 200% year-on-year, the video playback volume based on artificial intelligence recommendation increased by more than 400% year-on-year, and the number of daily active creators and the average daily video upload volume increased by more than 100% year-on-year.

This is a signal released to the outside world: the commercialization of video accounts needs to be accelerated, and Tencent has high hopes, focusing on provoking new potential energy for future growth, but how much potential energy can be released is hard to say at of now, it remains to be seen.

Overall, Tencent has experienced more than 20 years of ups and downs, and its ability to adjust is beyond doubt. This time is the low point of Tencent and the starting point of Tencent.

Louis Yap

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